The decrease in vehicle import last year has resulted in a contraction in the tax on vehicles sales collected by the government.

Image for illustrative purposes

Between January and November 2017, 65,668 new and used cars entered the country, 10,227 less than compared to the same period in 2016.

The situation has caused a deceleration in tax revenues, from 8.5% in the January to November 2016 period, to 5.4% for the same period in 2017, detailed Ministerio de Hacienda (Ministry of Finance).

The accumulated tax review from vehicle imports for the January to November 2017 period amounted to ¢230 billion colones (US$410 million dollars), while in the same period in 2016 it was ¢271 billion.

In 2016, taxes from vehicle imports accounted for 7.6% of the country’s total tax revenue, in 2017 it accounted for 6.1%.

Factors for the reduction

The monthly index of commercial activity of the vehicle business shows that during the past year, there was a rapid deceleration of this sector. Even as of October, it reported a negative interannual variation of 1.75%, according to the Banco Central (Central Bank).

The automotive sector blames the decline in the import of vehicles to economic factors, such as the sharp increase in the dollar exchange and interest rates.

From April to May 2017, the dollar exchange went from ¢560 to ¢595, then dropping to ¢570 and stabilizing for the second half of the year.

“The increase in the dollar (exchange) does make a difference: as it increases, so does the caution of customers to buy,” said Erick Xirinachs, Regional Commercial Director of Hyundai.

Changes in government policies also affected sales and tax revenues.

Carlos Aguilar, executive director of the Association of Importers of Vehicles and Machinery (Aivema), said that Hacienda modified the rules for the importation of cars of the year, which now is September of each year (from August).

Data from Hacienda shows that between January and November last year 43,359 new vehicles entered the country, down from 53,549 for the same period in 2016.

In the case of used cars, in 2017 the level of entry remained very similar to 2016, some 22,300 units.

Add to that the more restrictive measures implemented by the Superintendencia General de Entidades Financieras (Sugef) – General Superintendency of Financial Institutions – restricting credit in dollars for clients with incomes in colones.

The new Sugef rules were issued in 2013 but with a gradual application every year.

“The abrupt change to a more restrictive financing policy was a blow that has been stabilizing” explained Ana Lucrecia Vargas, director of marketing Grupo Danissa, distributor of Nissan and Audi vehicles.

The increase in interest rates in dollars and colones caused the consumer to be more cautious when buying a vehicle, said Jorge Ramirez, general manager of Purdy Motor Costa Rica. “Historically, prior to an electoral process the market, is more cautious,” said the businessman.

José Carballo, president of the Cámara Costarricense Automotriz (CCA) – Costa Rican Automotive Chamber, confirmed that the sales of used cars dropped up to 30% in the last quarter of 2017.

Carballo said that among the effects of the lower imports and sales is the reduction of staff of used car dealers.

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